Addressing the challenge of measuring the illicit financial flows
Turin (Italy), 7 January 2018. UNICRI is currently implementing an initiative that aims at creating new knowledge on the progress and challenges associated with measuring and achieving Goal 16 of the United Nations 2030 Agenda for Sustainable Development.
The Agenda, that includes 17 Goals, is a plan of action for people, planet and prosperity. Goal 16, which is specifically dedicated to the promotion of peaceful and inclusive societies for sustainable development, the provision of access to justice for all, and building effective, accountable institutions at all levels, represents a paradigm shift in the development of new policies as it explicitly recognizes the importance of peace, justice, and accountable institutions to achieve the sustainable development goals. Member States recognize that there can be no sustainable development without peace and no peace without sustainable development. Fostering peaceful, just and inclusive societies, based on fair and robust justice systems and free from crime and violence, is the basis for fighting poverty and reducing inequalities while enhancing economic growth and stability, and protecting the environment.
Moreover, Goal 16 becomes particularly relevant as for first time ever in the development agenda, reference is made to a specific target related to combating Illicit financial flows (IFFs). In particular, the indicator 16.4.1 of the Goal proposes that “by 2030, significantly reduce illicit financial and arms flows, strengthen the recovery and return of stolen assets and combat all forms of organized crime.”
However, due to the several challenges related to its measurement, indicator 16.4.1 is considered the ‘orphan indicator’ and is located in tier 3 in the classification of the Inter-Agency and Expert Group on Sustainable Development Goal Indicators (IAEG). Tier 3 means that no internationally established methodology or standards are yet available, they are being (or will be) developed or tested. The first challenge arises from the lack of agreement on the conceptual grounds. There is a common understanding that tax evasion, money laundering, trade mispricing, financing terrorism, drugs or other illegal doings, are activities that unequivocally fall under the category of illicit financial flows. However, there are other practices related to tax avoidance, which although legal, are more questionable and represent the most controversial part of the current debates.
The second issue that hinders the design and implementation of adequate policies to combat IFFs is related to the shortage of optimal methodological tools to measure them. Although several empirical models have been utilized so far to estimate both the magnitude and the economic implications of IFFs, there are serious doubts about their ability to reflect these parameters properly. In fact, main actors coincide in identifying the urgent need to define adequate measures of the volume and effects of IFF that can be monitored regularly.
In this context, the initiative - that has been made possible thanks to the support of Compagnia di San Paolo - focuses precisely on contributing to identify a widely acceptable concept and definition of IFFs. UNICRI is working hand in hand with other UN bodies towards exploring innovative approaches that are capable of adequately measuring Goal 16. Hence, as part of the international network of stakeholders on IFFs, UNICRI has actively participated in the Expert Consultation Meeting held in Vienna on 12-14 December, jointly organised by the United Nations Office on Drugs and Crime (UNODC) and the United Nations Conference on Trade and Development (UNCTAD).
With this project UNICRI aims at promoting the achievement of Goal 16 by producing new knowledge and tools to measure and address the impact of illicit financial flows on peace, justice and development.